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PALGRAVE STUDIES IN THE HISTORY OF ECONOMIC THOUGHT

Trevor Winchester Swan

Volume II
Contributions to Economic Theory and Policy

Peter L. Swan
 Palgrave Studies in the History of Economic
Thought

Series Editors
Avi J. Cohen, Department of Economics, York University and University
of Toronto, Toronto, ON, Canada
G.C. Harcourt, School of Economics, University of New South Wales,
Sydney, NSW, Australia
Peter Kriesler, School of Economics, University of New South Wales,
Sydney, NSW, Australia
Jan Toporowski, Economics Department, SOAS University of London,
London, UK
Palgrave Studies in the History of Economic Thought publishes contribu-
tions by leading scholars, illuminating key events, theories and individuals
that have had a lasting impact on the development of modern-day
economics. The topics covered include the development of economies,
institutions and theories.
The series aims to highlight the academic importance of the history
of economic thought, linking it with wider discussions within economics
and society more generally. It contains a broad range of titles that
illustrate the breath of discussions — from influential economists and
schools of thought, through to historical and modern social trends and
challenges — within the discipline.
All books in the series undergo a single-blind peer review at both the
proposal and manuscript submission stages.
For further information on the series and to submit a proposal for
consideration, please contact Wyndham Hacket Pain (Economics Editor)
wyndham.hacketpain@palgrave.com.
 Peter L. Swan

Trevor Winchester
Swan, Volume II
Contributions to Economic Theory and Policy
Peter L. Swan
UNSW Australia
NSW Sydney, NSW, Australia

ISSN 2662-6578 ISSN 2662-6586 (electronic)

Palgrave Studies in the History of Economic Thought
ISBN 978-3-031-23806-2 ISBN 978-3-031-23807-9 (eBook)
https://doi.org/10.1007/978-3-031-23807-9

© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer
Nature Switzerland AG 2023
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 Contents

1 Peter L. Swan The Twin Goals of Internal

and External Balance 1
2 Peter L. Swan: The Theory of Economic Growth 11
3 H. W. Arndt Non-traded Goods and the Balance
of Payments: The Australian Contribution 29
4 T. W. Swan Simple Algebra: External Balance,
Internal Balance and Price Stability 35
5 T. W. Swan Economic Control in a Dependent Economy 45
6 T. W. Swan Circular Causation 67
7 T. W. Swan Longer Run Problems of the Balance
of Payments 75
8 W. E. G. Salter Internal and External Balance: The
Role of Price and Expenditure Effects 87
9 H. W. Arndt Notes on T. W. Swan Population Growth
and Economic Development 105
10 T.W. Swan “Orbituary of Wilfred Edward Graham
Salter: 1929–1963” 109

v
vi CONTENTS

11 T. W. Swan Effective Protection with Cobb–Douglas

Input Substitution in Domestic Supply 113
12 T. W. Swan Overseas Investment in Australia:
Treasury Economic Paper No. 1 117
13 T. W. Swan Perceptions in Kaleidascope 123
14 Peter L. Swan “Why ABS Volume GDP Figures Can
Be Misleading” 129
15 John D. Pitchford Trevor Swan’s 1956 Economic
Growth “Seminar” and Notes on Growth 139
16 T. W. Swan Economic Growth 153
17 T. W. Swan Economic Growth and Capital Accumulation 165
18 Robert Dixon Trevor Swan on Equilibrium Growth
with Technical Progress 199
19 Robert W. Dimand and Barbara J. Spencer Trevor
Swan and the Neoclassical Growth Model 209
20 T. W. Swan Growth Models: Of Golden Ages
and Production Functions 231
21 T. W. Swan Technical Progress in Balanced Growth 249
22 N. G. Butlin and R. G. Gregory Trevor Winchester
Swan 1918–1989 253

Appendix 1: Trevor Swan and Joan Robinson 271

Appendix 2: Letter from Robert Solow, MIT, April 1, 1957 277
Appendix 3: Letters 279
Appendix 4: Timeframe—Trevor Winchester Swan
1918–1989 305
Bibliography 315
Index 327
 List of Figures

Fig. 1.1 Trevor Swan’s model of internal and external balance,

1955 5
Fig. 1.2 Geoff Pryor Cartoon Right through primary school I
had a desk next to a boy who was far more interested
in drawing splendid sketches than in lessons. This
was Geoff Pryor who sums up the Hawke-Keating
reforms in a magnificant cartoon. The Geoff Pryor
cartoon depicting (from left): Paul Keating, Bob
Hawke imposing a free market for the Australian dollar
on the Opposition Leader Andrew Peacock and his
deputy, John Howard. National Library of Australia
obj-156519017. https://www.nma.gov.au/defining-
moments/resources/australian-dollar-floated 9
Fig. 2.1 Solution to Trevor Swan’s growth model (Swan, 1956) 13
Fig. 2.2 Solution to Solow’s version of the growth model (Solow,
1956) 14
Fig. 5.1 Achieving both Internal and External Balance by setting
the right Cost Ratio (R/W) 53
Fig. 5.2 Choosing the right combination of the External Price
Level and the Money Wage 54
Fig. 6.1 An unstable non-linear relationship between White
prejudice and Negro standards 68
Fig. 6.2 A stable non-linear relationship between White prejudice
and Negro standards 70

vii
viii LIST OF FIGURES

Fig. 6.3 A sequence of high-level standards stability, instability,

and low-level standards stability 73
Fig. 7.1 How the simultaneous determination of internal
and external balance depends on the cost ratio and real
expenditure 78
Fig. 7.2 The four zones of economic unhappiness (dubbed
the Swan Diagram) 79
Fig. 8.1 a Indicates disequilibrium and Swan’s four zones
of economic unhappiness, b Illustrates the simultaneous
achievement of internal and external balance 90
Fig. 8.2 a Indicates excess expenditure and balance of payments
deficit, b Shows that even with income and expenditure
equal, the demand for importables can be too high 93
Fig. 8.3 a Shows the effect of a higher foreign price of tradeables,
b shows the beneficial effect of capital inflow permitting
a desirable balance of payments deficit 96
Fig. 8.4 a Indicates the impact of a worsening in the terms
of trade, b Shows that the response requires reduced
expenditure and devaluation of the exchange rate 99
Fig. 8.5 Illustrates lack of supply response in the short-run. a
shows the burden falling on unemployment, b shows
the use of devaluation in an effort to restore the trade
balance, c Shows the use of temporary import quotas 103
Fig. 15.1 Swan’s general model behind Chart (1) of the notes 146
Fig. 15.2 Swan’s more general “Swan Diagram” from Chart (3) 149
Fig. 17.1 Trevor Swan’s neoclassical growth model depicted
in terms of the growth rates of labor, capital,
and per capita output as a function of the capital-output
ratio 168
Fig. 17.2 A “classical” version of the model with land fixed in supply 173
Fig. 19.1 The Swan diagram 220
Fig. 20.1 The Golden Age equilibrium with a constant output
per unit of capital 235
 CHAPTER 1

Peter L. Swan The Twin Goals of Internal

and External Balance

We now come to the first set of papers which made Trevor Swan famous.
When Trevor Swan moved to the chair at the ANU he continued to
dwell over the problems of internal and external balance which had
been concerning him as an advisor to Prime Minister Menzies and even
earlier when he was developing his econometric model of the Australian
economy. In particular he was concerned that the very rapid immigra-
tion programme, and the investment required to equip the newly arriving
migrants would lead to excess demand in the economy and so create
difficulties for policymakers in their attempts to achieve full employment,
low inflation and a satisfactory outcome on the balance of payments (see
Swan, 1949, 1950a, 1950c, 1950d).
As early as November 1952, Swan wrote a paper, Simple Algebra
(1952) which is included in this volume, for a meeting of economists
at the Commonwealth (Central) Bank in Sydney addressing the issue of
simultaneously achieving three objectives:

1. Internal Balance. Taking the labour force and its productivity as

given, the objective is a certain volume of national production,
corresponding with some definition of “full employment”, and
neither greater nor less.

© The Author(s), under exclusive license to Springer Nature 1

Switzerland AG 2023
P. L. Swan, Trevor Winchester Swan, Volume II, Palgrave
Studies in the History of Economic Thought,
https://doi.org/10.1007/978-3-031-23807-9_1
2 P. L. SWAN

2. External Balance. Taking the terms of trade and capital inflow

as given, the balance of payments objective is a certain relation-
ship between the respective volumes of imports and exports, i.e.,
a certain real import surplus (which may be zero or negative)
3. The Internal Price-Level. The objective is a certain ‘general level’
of the prices of final goods and services purchased domestically, as
measured by some price-index”.

He then proposed an assignment of three instruments to these three

targets:

“Suppose there are three authorities (which may be market mechanisms)

effectively controlling the volume of domestic demand, the money wage-
level, and the external price-level (in domestic currency) respectively. They
may be called, for short, the Treasury, the Court, and the Bank. Let
instructions be given as follows:
a. The Treasury is to expand or contract the volume of demand
according to whether employment is less than or more than “full”.
b. The Court is to raise or reduce money wages according to whether
the import surplus needs to be increased or diminished.
c. The Bank is to raise or reduce the external price-level according to
whether the internal price-level is falling or rising”.

The title of this paper is “Simple Algebra”. But even though the title of
the paper indicates algebra, there is no algebra, only an English summary
of some algebra which clearly already exists. He mentions that this paper
owes its outline to Meade (1951), but there is an important innovation
in the argument of this paper, even though it is only implicit. Given
that Australia is a small country economically, it is reasonable to assume
that Australia cannot affect its terms of trade between the prices of its
export and imported goods. The exchange rate, together with the level
of money wages determined by the Arbitration Court, determines the
“real” exchange rate between foreign traded goods made up of imports
and exports, and domestic goods, that is, between traded and non-traded
goods, an idea that Swan had taken from Wilson (1931).1 The approach

1 Metaxas and Weber (2016, 5–8, 30) provide an excellent account of Wilson’s
important (1931) contribution.
 1 PETER L. SWAN THE TWIN GOALS … 3

by James Meade (1951) had largely relied on changes in the terms of

trade to exposit the equilibration in the external economy but, as Swan
(1960, 54) argued, this was not at all necessary.
In 1953 he circulated an additional paper on policy instruments and
targets that this time included the algebra. It is potentially confusing
that this paper was not published until 1960 (Swan, 1960), but it was
presented at a seminar in 1953, soon after the appearance of the Simple
Algebra paper. By inference from a dialogue from James Mill (1773–
1836), the father of John Stuart Mill (1806–1873), Swan (1960, 51) was
developing economic theory as a “commanding view of the vast combi-
nation of agents and operations engaged in producing, for the use of
man, the whole of things which he enjoys and consumes”. Once again,
he mentions Meade (1951) but is specific this time that the terms of
trade between import and export prices are fixed and that almost all of
Meade’s (1951) exposition is based on terms of trade effects which are not
a necessary requirement, as all Meade required was that the exchange rate
affect the relative prices of imports and exports. The three targets were
full employment, price stability and balance of payments equilibrium and
the three instruments, domestic demand to be managed via fiscal policy,
money wages to be managed by the Arbitration Court and the exchange
rate. Swan does not consider the interest rate and monetary policy. Trevor
also helpfully produces a diagrammatic treatment. But since this is three-
target, three-instrument problem, two diagrams are required, because it
is a three-dimensional problem.
A revised version with a far simpler diagrammatic presentation was
given as the Giblin Lecture at the 1955 ANZAAS conference, and to
a meeting of central bank economists with minor variations at much
the same time. Again, rather confusingly this was not published until
1963 (Swan, 1963). It solved in diagrammatic terms the problem of
simultaneously achieving both internal balance, that is full employment
without inflation, and external balance, that is a satisfactory outcome
on the current account of the balance of payments. The instruments
of policy were now taken to be the level of demand—as in the earlier
paper—and the real exchange rate, which policy could manipulate either
by changing the money wage or by changing the nominal exchange rate.
This had thus become a two-targets-two-instruments problem, a simpler
setup than that set out in the Simple Algebra paper. As in Swan (1960) an
important simplification was made by assuming that a small open country
like Australia cannot affect its terms of trade. The cost ratio of external
4 P. L. SWAN

to internal prices could thereby be represented on the vertical axis as

simply the ratio of the nominal exchange rate to the money wage rate.
He also abstracted from interest and monetary policy, unlike Mundell’s
subsequent work which I will describe below. Many years later, Rüdiger
Dornbusch (1973b, 876) (1942–2002), and see also Dornbusch (1973a,
1974), clarified the mechanism by which the price of non-traded goods,
here represented by the money wage, must fall within a monetary model
with a devaluation which: “cause the relative price of home goods to
decline at home and to rise abroad”.2
In Swan (1960) he employs the same three objectives as in Swan
(1952), namely “Simple Algebra”, and the same three instruments, but
now he supplies the algebra. He stresses the role that changes in real
wages must play in the maintenance of external balance. With “sticky”
money wages, changes in the exchange rate can bring about the necessary
changes in the real wage. A theme is adopted which Swan persists with
over his lifetime: while a devaluation raises domestic prices, revaluation
lowers them.
We now come to arguably Swan’s most famous paper dubbed by others
as the “Swan Diagram” which is shown in Fig. 1.1.
The horizontal axis of this diagram shows real domestic expenditure
made up of total domestic investment and consumption (private and
public) at constant prices, and on the vertical axis the real exchange
rate which is the price of imported and exported goods (i.e. all kinds
of traded goods) relative to the price of domestic goods as represented
by local wage costs. Domestic expenditure policies, exchange-rate policy
and domestic wage rates set via the Arbitration Court (now the Fair Work
Commission) now jointly determine both internal and external balance.
The four zones of economic unhappiness described on the diagram show
what is wrong with the economy when one is not on either of the lines.
For example, in Zone I there is over-full employment (i.e. inflationary
pressure) and a balance of trade surplus. Anthony Waterman (1966),
when a student supervised by Swan and Noel Butlin, extended Swan’s
(1963) analysis by adding in Bill Phillips (1958) empirical Phillips curve
relationship between the rate of inflation and the level of unemployment.
Ivor Pearce (1961) published an excellent mathematical treatment of the
problem when a member of Swan’s department. His treatment was very

2 As an aside, Rüdiger and I were colleagues at the University of Chicago in 1974 and
we discussed Trevor Swan’s contribution to Dornbusch’s own work.
 1 PETER L. SWAN THE TWIN GOALS … 5

Fig. 1.1 Trevor Swan’s model of internal and external balance, 1955

much along the lines of the small country assumption of Wilson (1931),
Swan (1952, 1960, 1963) and Salter (1959) when Pearce (1961, 28)
concludes: “It may be that the success of exchange depreciation as a policy
rests more upon its power to reduce the price of non-traded goods rela-
tive to those traded than upon its power to affect the real terms of trade”.
The strange thing about this contribution is that it made no reference to
the long history of Australian involvement in Ivor Pearce’s approach. This
failing was extensively commented on by Heinz Arndt’s (1976) survey of
the Australian contribution to the balance of payments literature, which
is the first paper to be included in this volume.
Some years later, at the Reserve Bank of Australia Port Stephens
Symposium on International Monetary Issues in 1976, Swan explained
how the real wage was the key to his diagram: “what some called the
‘Swan Diagram’ was completely misunderstood if the axes were misla-
belled. The diagram’s axes were labelled with the level of effective real
demand and the cost ratio of wages, i.e., another real variable and not the
exchange rate. One might as well use the level of real wages on that axis.
He agreed that shifts between traded and non-traded goods took a long
time. If such shifts were to be brought about, relative prices had to be
shifted first. And relative prices could only be shifted if changes the ratios
6 P. L. SWAN

of real wages could be brought about (apart from effects due to shifts in
indirect taxes and other minor factors). Hence the entire discussion about
price and quantity effects depended on whether or not the real wage was
endogenous to the system and could be affected by exchange-rate policy.
If the real wage was not affected, exchange-rate policy would have no
effect on the allocation of production to domestic and overseas demand.
It could only be seen as a variable affecting the price level”.
In essence, by constructing a Keynesian economic model relevant to
a small trading nation Swan could now articulate complex economic
policies to a large audience in a very simple and understandable way.
Two other well-known Australian economists, Wilf Salter (1959) and
Max Corden (1960), appear to extend Trevor’s diagrammatic approach.
A closer examination of Max Corden’s (1960, p. 4) Figure II reveals
that it does not include Swan’s external cost ratio for traded and non-
traded goods and thus its workings remain obscure and not directly
related to Swan’s contribution. Salter’s contribution is based squarely on
the dichotomy between traded and non-traded goods and thus follows
directly from Swan’s contribution. It is included in this volume, as is
that by Heinz Arndt (1976) which provides an excellent introduction to
Trevor Swan’s contribution. Salter (1959, 226) explains why what became
known as the ‘Australian model’ of the exchange rate is justified: “What-
ever may be the case in economies playing a major role in world trade,
in a dependent economy such as Australia no great damage is done if
secondary terms of trade effects are neglected. Variations in the terms of
trade - although frequent and often disastrous - are determined almost
exclusively by conditions abroad; while the effects of Australian policies
on the terms of trade are generally thought to be small”.
A limitation of Swan-Salter approach to simultaneously achieving
internal and external balance was that their approach was largely diagram-
matic without the backing of a dynamic micro-founded general equilib-
rium modelling foundation which has recently been supplied by Schmitt-
Grohé and Uribe (2021). Their main finding is to “show that the internal
and the external balance schedules of the Salter-Swan policy framework
continue to exist in a micro-founded general equilibrium version of the
nontradable and tradable goods model”. They explain that the crucial
insights from the Swan-Salter model continue to hold:
 1 PETER L. SWAN THE TWIN GOALS … 7

Employment, which is the internal target of the government, is affected by

both, the exchange rate and government spending. Devaluations stimulate
labor demand by lowering real wages, and public consumption has an effect
on the labor market through an expansion in the demand for nontradables.
Since both devaluations and public spending raise the demand for labor, a
government that aims to avoid both unemployment and overheating will,
all other things equal, move these two instruments in opposite directions.
The resulting negative relationship between the nominal exchange rate and
government spending captures the internal balance schedule of the Salter-
Swan policy framework. (Schmitt-Grohé and Uribe, 2021, 2).

After Swan’s diagram was included in the Arndt and Corden (1963)
volume of readings, many Australian secondary school economic students
in the 1960s and 1970s, not to mention most undergraduate students,
including myself, were brought up on the Swan diagram and the four
zones of economic unhappiness. It was a little ironic since Swan and, for
that matter, Colin Clark, saying that economics should not be taught in
schools. It was also reproduced in an appendix in the Australian version of
Samuelson’s best-selling text, Samuelson, Hancock and Wallace (1970).
When James Meade visited Swan’s department in 1955 he published
his version of Swan’s internal–external balance model in the Economic
Record, Meade (1955). Meade seems to have been convinced by Swan to
adopt Roland Wilson’s (1931) small country assumption to the exchange
rate as he states: “Now a depreciation of the exchange rate and a cut
in wage-rates are best regarded as alternative means of raising the price
of imports and exports relatively to the price of other products in the
Australian economy” (Meade, 1955, 244). Meade goes even further to
recommend that Australia consider a fully floating exchange rate (Meade,
1955, 254–255):

[A]s the value of the Australian pound fell, more and more speculators
would stop selling and would start buying Australian pounds, until a point
was reached at which a temporary deficit on the balance of payment was
being financed by an inflow of speculative funds. Thereafter, the rate of
exchange would rise or fall from month to month as events helped to
show the true seriousness of the initial disturbance or as new disturbances,
favourable and unfavourable, occurred and demanded new estimates of
Australia’s long-run prospects.
8 P. L. SWAN

In the early 1960s Robert Mundell published a number of articles on

exchange rates and internal and external balance. In Mundell (1961) he
produced a diagrammatic approach to internal and external balance like
Swan’s (1955) approach, except that he has output, rather than domestic
expenditure as in Swan’s diagram on the horizontal axis and the monetary
exchange rate on the vertical axis, rather than Swan’s real exchange rate
(price of traded to non-traded goods). With a flexible (floating) exchange
rate, a budget deficit creates an excess demand for home goods which is
corrected by an increase in output or by a fall in the foreign exchange
rate. With a stable configuration, he has the slope of the internal balance
line steeper than the slope of the external balance line, whereas in Swan’s
formulation shown in the picture above, one-line slopes upwards and the
other slopes downwards.
In Mundell’s formulation, monetary policy is used to lower interest
rates, but this cannot happen in Swan’s formulation as he takes the
interest rate as given.3 Such a reduction in interest rates increases the
demand for home goods, including investment goods, and reduces capital
inflows (raises capital outflows). Mundell’s main point is that monetary
policy provides a greater Keynesian multiplier impact on the economy
than does fiscal policy as the reduced capital inflow lowers the exchange
rate, thereby stimulating exports and reducing imports and so raising
aggregate demand. Mundell also argues that commercial policy, e.g.
Swan’s import controls, must be deflationary with a flexible exchange
rate after considering changes in the terms of trade. By contrast, Trevor
Swan’s “small country” assumption rules out changes in the terms of
trade. Of course, with a flexible exchange rate which was not achieved
in Australia until 1983, it would not be necessary to impose import
controls to achieve balance of payments equilibrium as adjustments to
the exchange rate would automatically achieve balance. Mundell (1962)
examines the formation of internal and external balance when policy
makers do not wish to change the exchange rate or impose exchange
controls. This contrasts with the Australian Government which adopted
a policy of a fixed exchange rate and frequently imposed severe import
restrictions. Mundell assumes that capital inflow responds positively to
a higher interest rate differential. With a fixed exchange rate, Mundell
argues that a higher interest rate will create a balance of payments surplus

3 In the earlier unpublished version of the model he had not proceeded in this way,
but he decided that it was appropriate to do so in the final version of the model.
 1 PETER L. SWAN THE TWIN GOALS … 9

due to higher capital inflows and this can only be corrected by a reduction
in the budget surplus. With this system in place, he argues that if mone-
tary policy were used to obtain internal balance and fiscal policy, external
balance, the resulting outcome would be unstable. Hence, Mundell
assigns fiscal policy to the internal balance objective and monetary policy
to the external balance objective. As noted above, this is precisely what the
Australian Government and the Reserve Bank attempted to do in 1960
when faced with a looming balance of payments crisis but the monetary
policy proved entirely ineffective with a sizeable expansion in the money
supply taking place and no tightening of interest rates.
The apotheosis of Trevor Swan’s policy contribution came with the
floating of the dollar in 1982 at the urgings of Trevor Swan and the
Reserve Bank as introducing a market for the exchange rate meant

Fig. 1.2 Geoff Pryor Cartoon Right through primary school I had a desk next
to a boy who was far more interested in drawing splendid sketches than in lessons.
This was Geoff Pryor who sums up the Hawke-Keating reforms in a magnifi-
cant cartoon. The Geoff Pryor cartoon depicting (from left): Paul Keating, Bob
Hawke imposing a free market for the Australian dollar on the Opposition Leader
Andrew Peacock and his deputy, John Howard. National Library of Australia obj-
156519017. https://www.nma.gov.au/defining-moments/resources/australian-
dollar-floated
10 P. L. SWAN

that the market now took care of the exchange rate—not politicians.
By adopting the major Campbell Committee reforms that introduced
competition to the banks, floating the dollar, lowering tariffs and abol-
ishing import restrictions, the Hawke/Keating Government essentially
unwound the Federation compact and created a dynamic competitive
economy for the first time since Federation. As a consequence, the
incomes of Australians have grown immeasurably in the last 40 years
(Fig. 1.2).
In recent decades, Trevor Swan’s model has been promoted in the
op ed pages of the New York Times by Nobel Laureate and columnist,
Paul Krugman (1998, 2010), who applied the model to Latin America’s
problems, and to China’s exchange rate, arguing that the Yuan was under-
valued in 2010. But Jeffrey Frankel, another MIT colleague of Krugman,
argued that the Yuan was now overvalued, https://seekingalpha.com/art
icle/195725-china-a-tale-of-three-swan-songs, rather than undervalued.
 CHAPTER 2

Peter L. Swan: The Theory of Economic

Growth

Having solved the problem of internal and external balance, using a

Keynesian kind of model, Swan was able to turn to problems of long-run
growth. Amongst Swan’s major theory accomplishments was the inde-
pendent development of the world’s first significant theoretical “growth
model” at about the same time as Robert (Bob) Solow (1956) made his
contribution which could be, and is, used to analyse the way resources
such as labour and capital are combined over time to produce real
increases in living standards. This paper was produced in the mid-
1950s, after the work on internal and external balance had been basically
completed and it was published in 1956 (Swan, 1956). As Swan says in
the first paragraph of that paper “[w]hen Keynes solved the great puzzle
of effective demand he made it possible for economists to once more
study the progress of society in long run… terms”.
As a young boy, Peter Swan recalled his father labouring over this
paper: “He took over the entire lounge room and dining table for days if
not weeks at a time, close on 24 hours a day. Numerous pages of paper
filled with algebra and diagrams were stacked up on the table. It was not
possible to enter the room as it was filled with tobacco smoke from either
his pipe or Benson & Hedges cigarettes”. With an austere upbringing
and few toys, his son constructed fiendish contraptions with the hundreds
of gold-coloured tin boxes which the cigarettes came in. Nothing went

© The Author(s), under exclusive license to Springer Nature 11

Switzerland AG 2023
P. L. Swan, Trevor Winchester Swan, Volume II, Palgrave
Studies in the History of Economic Thought,
https://doi.org/10.1007/978-3-031-23807-9_2
12 P. L. SWAN

to waste. When Peter Swan had the temerity to ask his father why he
chain-smoked back came the prophetic but very naive response: “I prefer
a quick ending from cancer!” He was proved precisely correct as he died
from throat cancer, doubtless related to pipe smoking in earlier days.
More than a thousand books and articles have built upon or utilized
this path-breaking model independently produced at about the same time
by Robert Solow (1956). Today, Trevor Swan’s 1956 article remains
the most highly cited article ever to appear in The Economic Record
with 7,714 Google Scholar citations to February 2023. It helped expose
Australian economics to a world-wide audience. Swan’s model together
with the now more famous contribution by Robert Solow (1956, 1957)
(see Dimand and Spencer, 2009, reproduced in this volume) is known as
the Solow-Swan Growth Model. Robert Solow was awarded the Nobel
Prize for Economics in 1987 for his work relating to the economic
theory of growth and technical change. It is helpful to compare the two
presentations of the model.
In his paper, Swan skilfully shows how his model can be collapsed onto
a two-dimensional diagram which is shown in Fig. 2.1 He puts/growth
rates on the vertical axis, and the ratio of output to capital, Y K , on
the horizontal axis. Swan does this because he wants to display the effect
of different rates of (Hicks-) neutral (i.e. TFP) technical change on his
diagram and this is only possible with the output to capital ratio displayed
on the horizontal axis and so long as he continued with his assumption
of the unitary elasticity Cobb-Douglas production function. Four years
later, in his 1960 Gamagori paper (not published until 1964) he proved
that in general Hicks-neutral technical change is not possible in a steadily
growing (Golden Age) economy as technical change is confined to the
Harrod-neutral, i.e. purely a labour saving or augmenting, type. Fortu-
nately, his 1956 diagram is still valid as with his Cobb-Douglas production
function Hicks and Harrod-neutrality coincide. There is a second advan-
tage as well. Swan wanted to be able to extend his diagram to examine
the Ricardian assumption of diminishing returns to scale and Malthusian
population issues and this is only possible with his expository structure.
The exogenous growth rate of the labour force, n, is shown as a horizontal
line. Swan assumes a value of 1% for n. The growth rate)of capital g K is
( /
an upward-sloping line through the origin, g K = s Y K . Swan assumes
that s is equal to 10%. Swan only makes this constant-returns assump-
tion initially, and I will return to this issue below. Swan, like Solow, also
initially ignores technical progress. His Cobb-Douglas assumption means
 2 PETER L. SWAN 13

Fig. 2.1 Solution to Trevor Swan’s growth model (Swan, 1956)

that the growth rate of output gY is a weighted average of g K and n, with

weights summing to unity because of constant returns to scale, as shown
in the line labelled yl . The lines cross at the equilibrium point, labelled
as point 1, at which gY = g K = 1%. Let us call the equilibrium output
to capital ratio (Y /K )∗ . When Y /K > (Y/K )∗ capital grows faster than
labour and thus faster than output, so the ratio (Y/K ) falls. The opposite
is also true. Thus, the equilibrium is stable. Swan’s diagram shows a value
of (Y /K )∗ = 0.1. Simple algebra shows that this is, in fact, the case when
s = 10% and n = 1%.
Halving the savings rate to 5% results in a new growth-of-output line
labelled y2 . After this happens, the initial outcome is a lower rate of
growth of output, but the long run outcome is one in which the growth
rate returns to 1% but at double the output-capital ratio, i.e. a lower
capital to output ratio. The same is true, in reverse, if the savings rate is
increased. Hence a permanently higher growth rate can only be achieved
if the labour force grows more rapidly (see, also, Spencer and Dimand,
2010).
14 P. L. SWAN

y
nk

sf(k)

k* k

Fig. 2.2 Solution to Solow’s version of the growth model (Solow, 1956)

I. Why Did Solow (1956) Become

More Popular Than Swan (1956)?
Just as we compared Swan’s sophisticated and rigorous diagram for
his econometric model, shown in Volume I, Picture 5, with Samuel-
son’s simpler model of the Keynesian system shown Fig. 6, it is worth
comparing Swan’s Fig. 2.1 with the simpler diagram produced by Robert
Solow , which is shown as Fig. 2.2. This picture comes from Solow’s
(1956) paper and is now reproduced in many undergraduate textbooks.
Solow puts capital per worker, k = K/L, on the horizontal axis and
output per worker y = Y/L on the vertical axis, where L is the labour
force.1 This allows us to represent the model with just two curves. The
upward-sloping straight line shows the investment per worker which is
necessary to ensure that capital keeps pace with the growing labour force.
This line has a positive gradient of n. The second line shows savings per

1 In Solow (1956, 69) it is actually the change in the rate of capital deepening, which
. . .
is on the vertical axis, where the rate of capital
.
deepening is defined as r /r = K /K − L /L
and the change in capital deepening is r = s F(r, 1) − nr My treatment in the text relies
on far simpler textbook explanations.
 2 PETER L. SWAN 15

worker, sf(k), where f(k) shows output per man as a function of capital per
man. This also has a positive slope, but one which gradually falls as capital
per worker increases, because of diminishing returns to capital.2 Thus,
subject to some obvious conditions, the two lines necessarily intersect, at
k = k ∗ . At this point, the capital per worker ratio is at an equilibrium
value. When the ratio is above this equilibrium value, it is falling, and vice
versa, so the equilibrium is stable (Fig. 2.2).
When the savings rate falls, as in Swan’s thought experiment, the
savings curve moves down, and capital per worker starts falling. It gradu-
ally falls to a lower equilibrium level. This reduction in the long-run level
of capital per worker corresponds to what Swan’s picture shows, which
is that the long-run level of the capital to output ratio is lower (i.e. the
output/capital ratio in the diagram is higher). And we can see from the
vertical axis that output per person is also lower. This last fact is clear from
Solow’s diagram, in which variables are expressed in levels, but it is not
directly represented in Swan’s diagram which shows growth rates of the
variables.
Swan uses his diagram to show how technical progress can lead to
steady increases in output per person and thus can cause a continuing
rise in living standards. To do this, he supposes that what he calls neutral
technical change, essentially total factor productivity (TFP), increases at
some positive rate but this form of technical change which has come to
be known as Hicks-neutral change is the same as Harrod-neutral with

2 Initially, Solow does not make any restrictions on the form of the production function,
as long as it has diminishing returns to each factor and constant returns to scale. Constant
returns to scale is required in order for his diagrammatic treatment to work, since only
then can one write the production function in the form y = f (k) However, when Solow
goes on to discuss the effects of a form of technical change which equally augments
labour and capital—i.e. one which causes increases in total factor productivity (TFP)—he
is forced to work with the more restrictive Cobb-Douglas function, just like Swan. That
is because, as explained below, his diagram can only display an outcome with equilibrium
growth in the presence of technical progress if that technical progress is labour saving.
And simple algebra shows that one can only correctly represent the effect of progress in
TFP as if it is labour-saving technical progress if the production function takes the Cobb-
Douglas form. We saw above that Swan (1956) also needed to assume a Cobb-Douglas
production function in order for his diagrammatic treatment to work. But initially, in Swan
(1982) but written relatively early in 1956, he both solved his model, and depicted it
diagrammatically, with an unrestricted form of production function, like that used initially
by Solow. Note that, as Swan (1964) demonstrated, only with the labour-saving technical
progress does there exist a steady-state solution in which the wage rate is rising at the
same rate as technical progress.
16 P. L. SWAN

the Cobb-Douglas production function. This shifts up the output growth

line in the Figure to the line y 3 as labour and capital are both being
augmented. Such a change would mean that when Y/K was equal to 0.1,
output would be growing faster than capital due to the higher marginal
product of capital and that both output and capital would be growing
faster than labour. As a result, the growth rate of the economy would
steadily increase. But diminishing returns to labour would mean that
eventually an equilibrium would be reached. This is shown as point 3
in the diagram, at which point capital and output are both growing at the
same rate with a constant output to capital ratio. The key then to Swan’s
model and diagram is that the output to capital ratio is constant along the
equilibrium growth path even with technical progress. But both would
be growing faster than the labour force, and so output per worker would
be rising. Since, as explained above, equilibrium on the Solow diagram
requires a constant capital to labour ratio, such a diagram cannot be used
to display the effects of technical change.
The way textbooks get around this problem is to redefine labour units
in Solow’s diagram with capital per effective worker on the horizontal
axis and output per effective worker on the vertical axis. The upward-
sloping straight line now shows the investment per effective worker which
is necessary to ensure that capital per effective worker keeps pace with
the growth in the effective labour force. Hence the slope of the straight
line increases from n to n + g if the effectiveness of labour is growing
at rate g. The second line now shows savings per effective worker, and
has exactly the same slope as before, again because of the assumption
of constant returns. This means that, if one were to begin at the point
k ∗ shown in Fig. 2.1, the initial outcome, after this happens, would be a
situation in which savings per effective worker were no longer sufficient to
keep capital per effective worker constant. So, capital per effective worker
would begin to fall. But capital per effective worker will eventually fall
to a lower level at which equilibrium is regained. In this new equilibrium
position, although output per effective worker is lower, output per worker
is now growing at the rate g, by assumption, and so real incomes are
increasing. Of course, the problem for the reader is to understand that
in terms of actual workers, capital per worker is continuing to rise as the
economy becomes more capital intensive and output per actual worker
continues to rise as well. In fact, if the real wage were to fail to keep pace
with the productivity rise, the economy becomes entirely dominated by
 2 PETER L. SWAN 17

capital.3 But this cannot happen in a “golden age” with uniform steady-
state growth. In the Swan diagram, the rising per capital income is visible
because it displays rates of change, but this is not the case in the Solow
diagram which is in terms of levels.
It is true that Solow’s version of the model has proved more popular,
although many still refer to the Solow-Swan model and Swan’s citation
count for the Economic Record remains the highest for any Australian
economist. Many years later Solow himself asked, “Trevor Swan—who
was a splendid macroeconomist—also published a paper on growth theory
in 1956 (Swan, 1956). In that article you can find the essentials of the
basic neoclassical model of economic growth. Why did the version in my
paper become the standard, and attract most of the attention?” (Solow,
2007, 3). Others have wondered the same thing (e.g. Robert Dimand and
Barbara Spencer (nee Swan) (2009). Solow provides three answers: (i)
Swan’s use of the simple Cobb-Douglas form of the production function,
(ii) the focus on Joan Robinson and her issues with an aggregate produc-
tion function, which I discuss below, and (iii) “Swan was an Australian
writing in the Economic Record, and I was an American writing in the
Quarterly Journal of Economics ”. Solow’s first explanation is implau-
sible. In fact, the first version of Swan’s model, Swan (1982), was quite
general and Solow (1956, 85) was forced to rely exclusively on the Cobb-
Douglas functional form to consider technological change as his model
can only handle Harrod-neutral purely labour-saving technical change.4
With Cobb-Douglas, Hicks (TFP technology) and Harrod-neutrality are
the same. The second explanation is also implausible as the treatment of
Joan Robinson was largely confined to the Appendix and Swan’s paper
demolished much of the Cambridge (England) case against the aggregate
production function and thus supported Solow’s position. Hence, we are
left with Solow’s third explanation which makes a great deal of sense.
The Quarterly Journal of Economics is by far the world’s most highly
cited economics journal, far exceeding the impact of the Economic Record
with the patriotic Swan wishing to support the home-grown product.

3 Peter Swan (1976) showed that Harrod-neutral technical change in the nineteenth-
century textile industry resulted in capital dominance because of the failure of wages to
keep pace with the high rate of technological improvement.
4 Naturally, Solow’s followers must confine textbook presentations to pure labour-saving
technological progress, but Solow’s (1957) famous empirical paper also assumes neutral
(TFP) productivity growth, not Harrod-neutral.
18 P. L. SWAN

Dimand and Spencer (2009) discuss Solow’s three explanations at greater

length and find some element of plausibility in all three explanations.
Their contribution is included in this volume.
Vines and Wills (2020) put forward a fourth explanation, namely
that, the apparent greater simplicity of the Solow diagram was helpful
in ensuring that the Solow version of the model became popular. But
they also argue that this simplification was a significant limitation. What
they say builds on the fact that Trevor’s paper was a lot more than the
co-first neoclassical growth model. It also explores classical Ricardian and
Malthusian issues, in a way which Solow did not do at all. In part, this
was because Swan was interested in Ricardian and Malthusian popula-
tion concerns, that is to explaining the classical economists. But what
he modelled was also directly related to Australian policy concerns. The
question Swan (1956, 339) asked, which Solow did not ask, was: “what is
the maximum rate of labour growth consistent with the maintenance of a
given standard of output per head”. Although not mentioned here, labour
growth was (and is) a policy instrument due to Australia’s commitment
to a very high rate of immigration. Swan had already written a number
of papers on the problem of absorbing Australia’s incredibly high rate of
immigration, Swan (1949, 1950a, 1950c and 1950d) and in the following
year, 1957, he gave the Presidential Address to Section G of ANZAAS on
population growth and immigration. Only Heinz Arndt’s Notes (1957)
on Swan’s speech have survived and I have included this summary in the
current volume.
In this speech Swan recognizes the Malthusian concern regarding
immigration with a fixed supply of land and diminishing returns. A high
level of savings is required to equip immigrants with sufficient capital.
However, he also expresses considerable optimism once the skills of immi-
grants are brought into the picture, together with economies of scale from
a larger population. Today, many economists argue that the vast immi-
gration programme that was temporarily halted during the COVID-19
pandemic should not be resumed due to a lack of infrastructure and low
or negative growth in real wages. Were Swan alive today he would point
to China’s aggression and the need to have a sizeable population to ward
off China’s threats with better defence preparedness from a more size-
able tax base, while drawing attention to the larger market created by
immigration and the importance of scale economies. Swan’s (1956) solu-
tion depended on sufficient technical improvement to offset the effects
of diminishing returns from the fixed supply of land. He thus does not
 2 PETER L. SWAN 19

consider economies of scale with respect to the population size. To discuss

this case he therefore required a version of the model in which the
production function displayed diminishing returns to scale. But that is not
possible for the Solow diagram, since it can only be drawn if one assumes
that there is constant returns to scale. Hence, Vines and Wills (2020) are
correct that Swan (1956) needed to use a more complex (and sophisti-
cated) diagram than Solow (1956) as he had a far more extensive agenda
in which he also needed to display the benefit of technological change in
a far more attractive manner than can be done with Solow’s approach.
Does the greater complexity of Swan’s diagram explain Solow’s relative
success? I personally don’t think so. Solow’s market power hypothesis,
his point (iii), is far more powerful and arguably Solow’s impact would
have been even greater had he adopted Swan’s diagrammatic approach.
In this regard, one might well ask why did not Solow place the output
to capital ratio on the horizontal axis like Swan? Swan did so because of
the constancy of this ratio when subject to technological change and such
an approach would have enabled Solow to display technological change
on his diagram. The reason Solow did not do so was due to an error.
Dixon (2003), included in this volume, points out that Solow (1956,
85–87) incorrectly claims that the capital-output ratio is increasing in the
steady state as a consequence of (Hicks-neutral) TFP-type technological
change. By contrast, Swan (1956) shows that the constancy of this ratio
is a defining characteristic of the growth equilibrium. Dixon (2003, 490)
goes on to say: “With the aid of his diagram (which features the output-
capital ratio on the horizontal axis) Swan was able to arrive not only at the
key neoclassical growth ‘proposition’ that the equilibrium rate of growth
is independent of the savings rate, but he was also able to correctly solve
for the equilibrium growth rate of output in the presence of technical
progress”. It is clear then that not only are there no errors in Swan’s expo-
sition and diagrams, but there is an error when Solow attempts to extend
his model to incorporate technological change.5 Perhaps this is what Swan
was warning against in his preliminary analysis, Swan (2002, 375) when
he stated: “Warning: Solow’s article is in several respects misleading”. It
would be wrong to conclude that Solow’s error was serious in the scheme

5 Of course, both authors at the time also thought incorrectly that general TFP tech-
nology, i.e. Hicks-neutral technical change, was consistent with both a steadily growing
state and a general production function.
20 P. L. SWAN

of things as textbooks soon corrected the error. It is only important in so

far as it denied Solow a better diagram.
Swan’s paper is a lot more than the co-first neoclassical growth
model. As already mentioned, it explores the classical Ricardian and
Malthusian paths but it also provides a series of insights into a number
of puzzles connected with Joan Robinson’s Accumulation of Capital
(1956), the Wicksell Effect, and Akerman’s problem.6 While Solow
(2007, 4) dismisses these topics in Swan (1956) as “a blind alley” and
much of the “Two Cambridges debate” which Solow lived through in
person as a Cambridge (England) visitor, as “one interminable and point-
less hassle with Joan Robinson”, Swan regarded his Appendix in which
these topics were discussed as being far more important that the main
body of the article.7 What if Swan had not addressed these topics and Joan
Robinson and Cambridge England had won the debate? Solow would
not have been able to dismiss Joan Robinson so easily. In his Nobel Prize
Lecture,8 Solow (1987) complains: “I was already trapped in the famous
‘Cambridge controversy’. I use the word ‘trapped’ because that whole
episode now seems to me to have been a waste of time, a playing-out of
ideological games in the language of analytical economics”.
Mordecai Kurz (1963) created an interesting extension of Swan’s
model by splitting the production of capital and consumption goods into
two sectors. A new result which is also true in Swan’s single sector model
is that when the economy is not on its terminal path, the more unde-
veloped an economy is, the higher the rate of growth it is capable of
attaining. This is important in understanding the rapid historical growth

6 Anthony Waterman (2020), who was supervised by Swan and Noel Butlin, had previ-
ously studied under Joan Robinson in Cambridge and was exceedingly impressed: “With
one exception, Joan Robertson was the most intelligent person I have ever met. She
instantly grasped the implications of a set of assumptions, followed them through to a
degree of complexity far beyond the grasp of any ordinary mind, saw at once the weak-
ness in any line of argument: and was incapable of understanding why the rest of us
were unable to follow. But I was a lazy and incompetent student, and my weekly essays
were pretty feeble. She patiently tried to help me, but I had never really grasped what
economics is all about”.
7 Swan’s correspondence indicates that he was greatly concerned that he may have
accidentally approved the reproduction of the main article without the inclusion of the
Appendix.
8 It is notable that in his Nobel Prize Lecture, Solow (1987) fails to credit Trevor Swan
as the independent co-discoverer of the neoclassical growth model.
 2 PETER L. SWAN 21

rate of Japan and the current high growth rate of China (prior to the
latest drastic attempts to halt COVID by draconian lockdowns that were
once so familiar to Victoria). Another interesting finding is that when the
savings ratio equals the relative capital shares then the interest rate is equal
to the growth rate of income.
Wicksell’s work on the treatment of durable goods in his analysis of
Akerman’s problem is the starting point for my work, and that of others,
on the economics of durable goods (see, for example, Peter Swan, 1970).
See Geoff Harcourt (1972) for a discussion of Trevor’s contribution
to the debate between Joan Robinson and other Cambridge (England)
economists and the Cambridge Mass. Economists, the so-called “Two
Cambridges” debate. See the work of economists such as Robert Solow
and Paul Samuelson at MIT; Steve Dowrick and Mark Rogers9 (2002),
Robert Dixon (2003) and Mark Rogers (2003) from Australia; and David
Romer (2019) from Berkeley, for surveys of some of the vast literature
that has been spawned by the model.
Much of the Two Cambridges debate concerned the claim made
by Joan Robinson (1953) that it was impossible to measure aggregate
capital to explain the marginal product of capital and the distribution
of income in a way which did not involve prices and interest rates—
the very things that the theory was supposed to explain. Labour and
land could be measured in terms of their own technical units to explain
their marginal products whereas it was claimed that capital was heteroge-
neous and needed to be defined in value terms, making it impossible to
explain profits, the interest rate and the share of income going to capital,
labour and land (Harcourt, 1972, 4). While Joan Robinson believed that
one could construct a measure of capital in relation to the amount of
labour required to construct it, this made it useless to explain the distri-
bution of income. To overcome this indeterminacy, Swan resorted to what
were popular children’s toys at the time: “the device of using a primary
unit, namely, a one all-purpose commodity – his famous Meccano set10

9 Mark Rogers was an English economist who undertook his PhD at ANU and later
returned to Oxford. Tragically, both Steve Dowrick and Mark Rogers died at relatively
young ages from brain tumours.
10 Peter Swan reminisces: “Yes, at one stage I possessed a small number of Meccano
Set pieces, but I was not over-endowed with toys other than the fantastical contraptions I
constructed from Benson & Hedges cigarette tins. On Trevor’s frequent overseas trips, he
would return with exotic toys not available in Australia. One such toy nearly resulted in
22 P. L. SWAN

model – so that capital can be measured in terms of its own unit, i.e.,
itself. The commodity is, moreover, malleable so that both specificity and
heterogeneity – two essential characteristics of capital goods – may be
abstracted from, and the implications of disappointed expectations in the
sense of actual quasi-rents differing from expected ones may be avoided”
(Harcourt, 1972, 5).
Despite the great friendship which developed between Joan Robinson
and Swan, she never accepted his critique of her rejection of aggregate
production functions and the idea that the marginal product of capital was
a meaningless concept and also to explain the distribution of income.11
Crucially, Trevor assumes (Swan, 1956, 344): “Output consists of goods
(including Meccano sets) that are all produced and sold at constant price-
ratios amongst themselves, no matter how the rates of wages, rents, and
profits may vary…”. It is essentially this constant price ratio assumption
Joan Robinson objects to. If the relative prices of capital and consump-
tion goods do not differ, as Swan assumes, then there is no problem with
units. It does not matter whether income is measured in consumption
units, capital units, or money. Since Joan Robinson has no problem with
labour being measured in its own technical units, why does she object to
Swan doing the same with capital? Robinson also objects to the restric-
tive assumptions of the Cobb-Douglas production function. However,
nothing in the theory depends on this and, indeed, it was relaxed in
Swan’s first draft presented at an ANU seminar in June 1956 and not
published until 2002. Swan points out that allowing the price of Meccano
sets to vary in terms of product causes no problems for the neoclassical

the closure of Canberra’s Airport. It was a sparkling toy aluminum plane that I flew high
above Capital Hill where Parliament now sits, rising many hundreds of feet. Following
complaints from pilots concerning this dangerous object in the skies, I was advised not
to fly it again unless kept very close to the ground. An enduring mystery that Peter still
fails to understand is how the Canberra airport officials identified him as the controller of
the unauthorized high-flying model aircraft”.
11 In her comment in the Economic Record (Robinson, 1957, 103) on Swan’s growth

model she argues that in the formula (1) (Robinson, 1957, 335), y = αs K Y + βn, where
Y
y is the growth rate of output, s is the given rate of savings to income, s K is the annual
growth rate of capital, Y is output, K, the capital stock measured in Meccano sets, n is
the growth rate of labour, α and β are the constant capital and labour elasticities of the
constant returns to scale Cobb-Douglas production function, and sY is annual savings
which in turn equals annual investment at full employment, capital and income must be
measured in the same units.
 2 PETER L. SWAN 23

story as the price of Meccano sets in terms of product now enters the
marginal conditions. The same happens when the price of labour varies
relative to product. It is the price of Meccano sets in terms of output and
the price of labour in terms of output which enable both homogenous
capital and homogenous labour to be converted to the units in which
output is measured.
Moreover Swan (1956, 351–360) derives in detail the Wicksell Effect
where he shows it to be a revaluation or inventory effect when the price
of the Meccano set alters. Joan Robinson (1957, 107–108) largely seems
to accept that Trevor is correct if one can stick to capital being measured
in its own technical units, but she continues to reject this interpretation
of capital. Joan Robinson (1958) and (1971) continued her fight against
Swan’s treatment of her work on much the same lines as in Robinson
(1957) and also in her correspondence with him.
Dimand and Spencer (2009) also try to explain Swan’s great hesitancy
to publish (2009, 120). Barbara believes that her father’s reluctance to
publish was mainly due “to an extremely high standard that he set for
his own work and to an inherent modesty as to the value of his academic
contributions. For example, she says Swan (1956, 334, 342) claims very
little with respect to the paper’s contribution to the literature: ‘The aim
of this paper is to illustrate with two diagrams a theme common to
Adam Smith, Mill, and Lewis, the theory of which is perhaps best seen
in Ricardo”, and “the model used above differs from Harrod’s model
of economic growth only in that it systematizes the relations between
the ‘warranted’ and ‘natural’ rates of growth, and introduces land as a
fixed factor’”. This tragic reluctance to publish combined with his insis-
tence that what little he did publish be published in The Economic Record
arguably had severe consequences for Trevor Swan. He missed out on
sharing in, at least, Nobel Prizes which were awarded to Tinbergen, Klein,
Mundell, Meade and Solow, he missed out on knighthoods awarded to
Crawford, Melville, Wilson and Wheeler, buildings such as Arndt and
Coombs, and departments such as Arndt and Corden, while his friend,
Coombs, had both a building and a Canberra suburb named after him
although he resigned his Companion of the Order of Australia. Selwyn
Cornish12 in correspondence makes clear that the building named after

12 “I was a member of the planning group for what became the Arndt Building, which
was to house the Department of Economics in the Faculties. The four professors were
Manning Clark, Fin Crisp, Alec Hope, and Heinz. The first three all had buildings name
24 P. L. SWAN

Heinz Arndt was due to an important founding role, not necessarily

his international reputation as an economist in comparison with either
Max Corden or Trevor Swan, or any other economist. Despite charac-
teristics which many applaud, Swan’s complete lack of personal ambition
and excessive humility is not at all to be placed on a pedestal. Quite the
reverse as all scientific progress requires debate, especially in the economic
disciplines.
In the 1980s there was a considerable revival of interest in growth
theory but with a twist. The interest stemming from Romer (1986) and
Lucas (1988) gave rise to what became known as Endogenous Growth
Theory. This literature is surveyed by Cesaratto (1999) who argues that
this was an attempt to restore the role of savings and thrift to the
pantheon of neoclassical growth theory that had been excised by Solow
and Swan. In the Solow-Swan model savings ceases to be important as a
determinant of the long-run growth rate. Worse still, in the absence of
labour growth and technical change a higher savings rate simply speeds
the approach of the stationary state. Cesaratto (1999) is critical of the
special assumptions that this new literature makes to obtain steady-state
equilibria.
As part of what would become the India Project, Swan was invited
to the Massachusetts Institute of Technology (MIT) in Cambridge,
Massachusetts, for three months in the US summer of 1958, but for Swan
the attraction was Robert Solow and Paul Samuelson.13 While Trevor
Swan was at MIT he pointed out that a production function Solow was
utilizing had the constant elasticity of substitution (CES) property. In
this way, the CES function was officially born. Solow and his co-authors

after them, the fourth – Heinz did not. That, together with the fact that the new building
was to be the economics building and Heinz was the first Professor of Economics and the
first Dean of the Faculty of Economics in Canberra University College (later the ANU’s
School of General Studies) it seemed to me that the building should be named after him.
I wrote to the Vice-Chancellor putting the case for the building to be called the H W
Arndt Building and [Vice Chancellor] Ian Chubb supported the proposal”.
13 Waterman (2020) was even more impressed by Paul Samuelson than he was by Joan
Robinson. Paul remarked to him: “I never bother to talk to people who agree with me: I
learn nothing from them”. Waterman pondered: “Why though, would the world-famous
Paul Samuelson bother to disagree with an unknown nonentity like me from a place no-
one had ever heard of? I think it was a sign of his true greatness that he was completely
without prejudice with respect to his fellow human beings: always willing and eager to
learn from any”. Likewise, when I (Peter Swan) met up with Paul Samuelson at MIT, he
was both exceedingly friendly and entertaining.
 2 PETER L. SWAN 25

publicly thanked Swan for this insight (see Arrow et al., 1961). Swan then
went briefly to the main UK universities, also as part of the India Project,
and then to New Delhi for nine months to work on the Indian Five-Year
Plan during 1958–1959. Pat, myself and siblings, Barbara and Richard,
accompanied Trevor Swan to Cambridge, Mass. Pat and the siblings then
spent three months travelling all around Europe, missing out on the Delhi
summer, prior to three months in India and then returning home.
Swan (1964) is Trevor Swan’s follow-up to his 1956 growth model.
It failed to enjoy quite the popular success of his earlier article, despite
its novelty and imaginative insights into steadily growing economies, I
believe largely because it was published in book rather than article form
four years after it was presented in the Gamagori conference held in the
Aichi Prefecture of Japan in 1960. Never-the-less, his contribution was
republished in the influential collection of readings in economic growth
compiled by Amartya Sen (1970). In this paper he shows that what Joan
Robinson termed a “golden age” in which every variable (with the excep-
tion of a constant savings rate, s ) is growing at a constant rate, has
severe limitations. It is not a simple generalization of the steady state.
While there exists an infinite number of golden ages, the first question he
addressed is what is the optimum savings rate s to maximize consump-
tion per head? The higher the savings rate, the higher the output per
head, but too high a savings rate will reduce per capita consumption. His
answer was simple: equate the savings rate to the elasticity of output with
respect to capital denoted Alpha, i.e. α = δδ loglog Y
K = s. This condition is
satisfied in a competitive equilibrium if all profits are saved, and all wages
spent.
Perhaps Swan’s most interesting finding is that only so-called Harrod-
neutral purely labour-saving technical change is possible in a golden age.
Harrod-neutral technical change does not disturb the output-capital ratio
with a constant rate of( profit. He) shows that the production function must
take the form Y = f K , N q emt , where Y is output, and the production
function f is homogeneous of degree 1 in K and N q emt with m the rate
of purely labour-saving technical change. With an elasticity of substitution
of 1, which is the Cobb-Douglas case, the type of technical change does
not matter as the Hicks (i.e. TFP) and Harrod definitions are the same.
If q = 1, it is constant returns to scale. Amano (1964), published in
the same year as Swan’s contribution was published, also establishing that
26 P. L. SWAN

technical progress must be either Harrod-neutral or that technical change

is always biased to save the most expensive factor.
Swan expands his model to introduce constant fixed lives of machines
incorporating vintage effects when there is only the most recent machine
incorporating the most up-to-date technology. Peter Swan (1976)
considers a firm employing infinitely lived (cotton spinning) machines
subject to Harrod-neutral technical change and vintage effects. He solves
the difference equation to show that the age at which each vintage of
machine is scrapped is always increasing. This agrees with the historical
record. In the limit, the last machine is never scrapped as capital costs are
too high relative to labour. This is because the cost of the labour compo-
nent is always falling relative to the capital cost. Interestingly, Murray
Kemp (1925–2021) of the University of New South Wales wrote to
Trevor Swan on July 17, 1963, making the same point: “the economic life
of the equipment may fall short of the physical life”. However, such criti-
cisms as these made by me and Murray Kemp are only applicable outside
a Golden Age. As Joan Robinson points out, in a golden age, the real
wage of labour will be rising at the same rate as the Harrod Neutral tech-
nical change, precisely offsetting the incentive to continually increase the
economic life of the machine. In this fashion, Trevor Swan’s findings can
be resurrected.
Following his 1960 Gamagori presentation, Swan (1964), Swan
(1962) published a fascinating theory piece on circular causation, insta-
bility and multiple equilibria which bore some resemblance to Kaldor’s
(1940) theory of the trade cycle. Disequilibrium economics and associ-
ated non-linearities was a favourite topic for Trevor Swan and Trevor’s
colleague at the time. Glenn Withers reports a conversation between
Trevor Swan and Heinz Arndt in which they chatted about their friends,
Gunner Myrdal, Nicholas Kaldor,14 Sir John Hicks (1904–1989) (Nobel
Prize awarded in 1972), and Walt Rostow (1916–1983) with whom they
had discussed disequilibrium economics in places as far afield as Delhi,
MIT and Oxford. The Swedish economist and sociologist, Karl Gunner
Myrdal (1898–1987), along with Friedrich Hayek, received the Nobel

14 I (Peter Swan) met Nicholas Kaldor informally in November 1963 when Trevor,
Nicholas, and I swam in the Murrumbidgee River near Canberra. Inconvenient if he
wished to brave more Australian rivers, Kaldor left behind his (oversized) swimming
trunks which were kept as a memento of his visit.
 2 PETER L. SWAN 27

Prize in Economic Sciences in 1984. Swan’s work on circular causa-

tion provided an elegant diagrammatic treatment of trade cycle models.
Multiple equilibria models are having something of a revival as indicated
by contemporaneous trade cycle models such as Vines and Wills (2020).
However, Swan’s application is based on Gunner Myrdal (1944) in which
White prejudice against Blacks denied access to education and training,
and thus exhibit a lowered standard of “behaviour”. This lower standard
in turn exacerbates the prejudice against them. Causation is circular as
White prejudice causes a decline in Black standards and lowered Black
standards increases White prejudice against them. Trevor mentioning his
admiration for the way Myrdal made it easier for economists to under-
stand the non-linearity phenomenon by the way he (Myrdal) discussed
changes in urban racial segregation in the USA. This paper is included in
this volume.
 CHAPTER 3

H. W. Arndt Non-traded Goods

and the Balance of Payments:
The Australian Contribution

Dr P. M. Oppenheimer, in an interesting note in the Journal of Economic

Literature (1974) quotes Anne Krueger (1969) on the role of non-traded
goods as one of the two radical changes which the theory of exchange-
rate adjustment has undergone since 1950, “thanks to I. F. Pearce, who
showed that the major function of devaluation is to raise the relative price
of traded goods and not the relative price of imports”. After mentioning
that, ten years before Pearce, Meade had devoted a chapter of his The
Balance of Payments (1951) to the relative price of traded and non-traded
goods without ever considering the case of the small country which is a
perfect competitor in world markets and whose terms of trade are there-
fore externally given, he adds that “the perfectly competitive case was
analyzed later by W. E. G. Salter (1959) and, less explicitly, by T. W.
Swan (1968)” (p. 882). In the interest of historical accuracy and fairness,
and without detracting from the merits of Pearce’s synthesis, it should
be pointed out that the main ideas which Pearce was synthesizing in his

Heinz Arndt, 1976, “Non-Traded Goods and the Balance of Payments: The
Australian Contribution”, Economic Record 52 (1), 104–107. Approval for
inclusion in this volume provided by his daughter, Bettina Arndt, 11 July 2022.

© The Author(s), under exclusive license to Springer Nature 29

Switzerland AG 2023
P. L. Swan, Trevor Winchester Swan, Volume II, Palgrave
Studies in the History of Economic Thought,
https://doi.org/10.1007/978-3-031-23807-9_3
30 P. L. SWAN

1961 article had for a decade formed part of an “oral tradition” amongst
the group around Trevor Swan at the Australian National University.
Swan’s article, the fons et origo of this tradition, exists in five versions,
only the second and third of which were published; the second in 1960,
the third in 1963 (not 1968). The first version, entitled “Simple Algebra:
External Balance, Internal Balance and Price Stability”, was written in
November 1952 for a meeting of economists at the Australian central
bank in Sydney. In this paper, the central point was made quite clearly,
although Swan referred to “the ratio of the external price level (an
index of the prices of exports and imports in domestic currency) to the
domestic cost-level represented by the money wage-level”, rather than to
the relative prices of traded and non-traded goods (1952, p. 2).
The second version, written in June 1953 for a seminar at the
Australian National University, under the title “Economic Control in
a Dependent Economy”, emphasized that the terms of trade between
export and import prices were taken as given. To treat the terms of trade
as a datum is in sharp contrast with most of the literature; the argument
is directly applicable only to a ‘dependent economy’—i.e. a small country
which trades in world markets that are competitive in the sense that the
prices it receives for exports and pays for imports are independent of its
domestic conditions of supply and demand.1 However, for a majority of
countries (by number, not by weight), and typically for those exporting
chiefly primary products, this assumption is closer to reality than the usual
textbook situation in which the terms of trade are regarded as sensitive
to domestic changes and home-trade products are more or less inter-
changeable with exports” (1953, pp. 53f). Here Swan added a crucial
footnote:

1 Swan’s use of “dependent economy” differed from the more usual one as in Simkin’s
The Instability of a Dependent Economy (1951), an economy which imports its fluctuations.
 3 H. W. ARNDT NON-TRADED GOODS … 31

“This is, for example, the situation envisaged almost throughout the latest
standard work, J. E. Meade’s The Balance of Payments, 1951. Thus Meade
insists that the whole modus operandi of exchange depreciation as a means
of improving the balance of trade is by cheapening exports in terms of
imports (e.g., p. 170). Again, he reaches the conclusion that an effective
exchange depreciation must reduce real wages via a worsening of the terms
of trade (p. 202), although in fact the conclusion holds even if the terms of
trade are left unchanged. It is significant that an economist from a primary-
producing country was one of the first to develop balance of payments
theory along new lines by stressing the relationship between external prices
and domestic costs, rather than the terms of trade (Dr Roland Wilson,
Capital Imports and the Terms of Trade, 1931)”.

Dr (now Sir) Roland Wilson’s book (1931) is now rare and not widely
known outside Australia. But his contribution might have been remem-
bered through Jacob Viner’s account of it in his famous Studies in the
Theory of International Trade: “Wilson examines the effects on relative
prices … of a continued import of capital. … He concludes that relative
price changes will ordinarily be necessary for restoration of equilibrium.
…. He believes that he demonstrates that the changes in export and
import prices, relative to each other, make no direct contribution…. and
that it is the relative changes in prices between domestic and international
commodities which, together with the shift in demand resulting from the
transfer of means of payment from lender to borrower, brings about the
transfer of the loan in the form of goods” (1937, p. 327).2
The third version of Swan’s paper, the first to include the “Swan
diagram”, was written in May 1955. It is this paper which is cited by
Oppenheimer. When it finally appeared in print, the publisher’s blurb
referred to it as “previously available only in roneoed form …. which
has become well-known to students throughout Australia”. The fourth
version, presented as a paper to the August 1955 Congress of the
Australian and New Zealand Association for the Advancement of Science,

2 Viner did not accept Wilson’s argument. He objected to it on the ground that “it fails
to take into consideration the necessary relationship between the prices in each country
of domestic and export commodities resulting from their competition for the use of the
same factors of production. If in either country the prices of domestic commodities rose
or fell relative to export commodities, factors of production would be diverted from the
low-price to the high-price industry until the earning power of the two factors in the two
industries was equalized” [p. 330]. Viner apparently failed to see that it is this shift of
resources which is the real mechanism of balance of payments adjustment.
32 P. L. SWAN

under the title “The Problem of Wage Policy for 1955-56”, was identical
with the third, except for the addition of a prefatory two pages pointing
out the implications of the analysis for wage policy in the circumstances
of that year (1968). A fifth version, under the title “Full Employment
and the Balance of Payments”, extended the analysis to show the “gold
standard automatic adjustment pattern” with flexible wages and to point
out that “in reality the policy requirements are in accord with the natural
tendency only in zones I and III” (1956).
Meade spent the year 1956 as Visiting Professor in Swan’s Depart-
ment at the Australian National University. It was during this period that
he was converted to the Australian view, as he acknowledged in an article
published in The Economic Record in 1956.3 He now stated unequivo-
cally that “a depreciation of the exchange rate and a cut in wage-rates
are best regarded as alternative means of raising the price of imports
and exports relatively to the price of other products in the Australian
economy” (1963, p. 244).
Swan’s analysis was further refined in two papers, by Salter (1959) and
Corden (1960) both of whom employed ingenious diagrams of their own
to bring out various aspects hidden in the Swan diagram which, as Corden
put it, “while magnificently simple, … is a clock without a visible mech-
anism” (p. 20).4 Pearce’s 1961 paper, published towards the end of his
five-year period as a Professorial Fellow in Swan’s Department, presented
an elegant algebraic formulation of the argument. But its conclusions
substantially restate the view which Swan had advanced in 1952 and
which had become familiar in Australia during the 1950s. That Oppen-
heimer has followed Anne Krueger in naming Pearce rather than Swan as
the main innovator is understandable because Swan failed to publish his
path-breaking article for more than a decade and because Pearce’s article,
unlike those by Meade, Salter and Corden, contained no acknowledge-
ment to Swan. To bedevil history, Swan and Pearce both maintained, as
they now tell me, that no acknowledgement was necessary, since Pearce’s

3 The author of this note remembers a long discussion on a DC3 flight from Canberra
to Sydney which was part of the process.
4 Wilfred Salter was at that time a Research Fellow in Swan’s Department; Max Corden
was at Melbourne University but in close touch with the ANU economists.
 3 H. W. ARNDT NON-TRADED GOODS … 33

analysis was developed independently in 1956 in England, was sufficiently

general to include Swan’s in some respects as a special case, and finally
appeared as from the Australian National University.

H. W. Arndt
Australian National University, Canberra
Date of Receipt of Typescript: September 1975

References
Corden, W. M., 1960, “The Geometric Representation of Policies to Attain
Internal and External Balance”, Review of Economic Studies 28(October):
1–22.
Krueger, A. O., 1969, “Balance of Payments Theory”, Journal of Economic
Literature 7(March): 1–26.
Meade, J. E., 1951, The Theory of International Economic Policy, Vol. 1. The
Balance of Payments. Oxford University Press, London.
Meade, J., 1956. “The Price Mechanism and the Australian Balance of
Payments,” Economic Record 32: 239–256. Reprinted in H. W. Arndt and
W. M. Corden (eds.) 1963, The Australian Economy: A Volume of Readings,
Cheshire, Melbourne.
Oppenheimer, P. M., 1974, “Non-Traded Goods and the Balance of Payments:
A Historical Note,” Journal of Economic Literature 12: 882–888.
Pearce, I. F., 1961, “The Problem of the Balance of Payments,” International
Economic Review 2: 1–28.
Salter, W. E. G., 1959, “Internal and External Balance: The Role of Price and
Expenditure Effects,” Economic Record 35: 226–238.
Simkin, C. G. F. 1951, The Instability of a Dependent Economy. Clarendon Press,
Oxford.
Swan, T. W., 1952, “Simple Algebra: External Balance, Internal Balance and
Price Stability,” mimeo, November 19, pp. 9.
Swan, T. W. 1956, “Full Employment and the Balance of Payments”, typescript,
pp. 6.
Swan, T. W., 1960, “Economic Control in a Dependent Economy,” Notes for
a seminar on “Social Control,” 30 June 1953, pp. 18. The Economic Record
36(73)(March): 51–66.
Swan, T. W., 1963, “Longer Run Problems of the Balance of Payments,” in
H. W. Arndt and W. M. Corden (eds.), The Australian Economy. Cheshire,
Sydney. Originally mimeographed and circulated in May 1955. Reprinted in
Richard E. Caves and Harry G. Johnson (eds.), Readings in International
Trade (selected by a Committee of the American Economic Association).
34 P. L. SWAN

Reprinted in Richard E. Caves and Harry G. Johnson, 1968, Readings in

International Economics, Richard D. Irwin (ed.), volume 11. Homewood,
IL: 455–465.
Swan, T. W. 1968, Economics, Irwin, Homewood, Ill., Australian and New
Zealand Association for the Advancement of Science, Section G, August 1955,
mimeo, pp. 9.
Viner, J. 1937, Studies in the Theory of International Trade. Harper, New York.
Wilson, R., 1931, Capital Imports and the Terms of Trade. Melbourne University
Press in association with Macmillan, Melbourne.
 CHAPTER 4

T. W. Swan Simple Algebra: External

Balance, Internal Balance and Price Stability

1. These notes arise out of a conversation with X.Y.Z., in the course of

which we decided

a. that we had to endorse or at least to accept as a political fact, the

proposition that returns should be increased in relation to costs in
exporting and perhaps also in some import-competing industries;
and
b. that nevertheless our hunch was that the Arbitration Court
should reject the employer’s claims.
We lost ourselves in an attempt to reconcile these views and
concluded (under some one-sided pressure) that we might be
driven to algebra for a solution. The following is an English
translation of an analysis which, in outline, is due to James Meade.

Trevor W. Swan, 19th of November 1952, “Simple Algebra: External Balance,

Internal Balance and Price Stability” mimeo.

© The Author(s), under exclusive license to Springer Nature 35

Switzerland AG 2023
P. L. Swan, Trevor Winchester Swan, Volume II, Palgrave
Studies in the History of Economic Thought,
https://doi.org/10.1007/978-3-031-23807-9_4
36 P. L. SWAN

Three Objectives
2. Suppose that national policy seeks certain specified objectives in
relation to

I. Internal Balance. Taking the labour force and its productivity as

given, the objective is a certain volume of national production,
corresponding with some definition of “full employment”, and
neither greater nor less.
II. External Balance. Taking the terms of trade and capital inflow
as given, the balance of payments objective is a certain relation-
ship between the respective volumes of imports and exports, i.e. a
certain real import surplus (which may be zero or negative)
III. The Internal Price Level. The objective is a certain “general level”
of the prices of final goods and services purchased domestically, as
measured by some price-index.

3. Definitional and economic relationships linking the variables directly

or indirectly involved in these objectives impose conditions upon
their achievement—conditions equivalent to the rule that you can’t
have your cake and eat it too.

I. Conditions for Their Realization

4. Consider the Problem of achieving the three Specified Objectives
in a simple economic system which may be represented by the
following relationships:

(i) The aggregate of domestic demand (for consumption and invest-

ment, public and private) must match the aggregate supply from national
production specified at full employment plus the specified import surplus .
In terms of realized absorption and supply, this is a definitional identity,
but Objectives I and II convert it into a true conditional equation of
supply and demand. The unique aggregate of domestic demand which
satisfies the equation is a necessary condition, for those objectives, but
 4 T. W. SWAN SIMPLE ALGEBRA … 37

not a sufficient condition, since the aggregate may not be correctly split
between production (for internal balance) and the import surplus (for
external balance).
(ii) The realization of the specified import surplus depends on the
aggregate of domestic demand and also on the ratio of external price level
(an index of the prices of exports and imports in domestic currency) to
the domestic cost level represented by the money wage level.
The latter ratio determines the split between production and the
import surplus by influencing the relevant supplies and demands through
the competitive position of exportables and imports. Since domestic
demand in the aggregate is already uniquely prescribed under (i), the
satisfaction of (ii) requires a unique ratio of the external price level to the
money wage level.
(iia) The realization of the specified national production at full employ-
ment depends on the aggregate of domestic demand and also on the ratio
of the external price level to the money wage level.
This relationship follows automatically from (i) and (ii), and can there-
fore be ignored or else considered in place of either of them. If aggregate
demand equals aggregate supply, as specified under (i), and if the external
price/money wage ration ensures the correct import surplus, as specified
under (ii), then by subtraction the remainder of aggregate demand must
be just sufficient, at the same ratio, to ensure the correct level of produc-
tion and employment. Similarly, if (i) and (iia) are satisfied, (ii) cannot fail
to be satisfied; and the satisfaction of (ii) and (iia) obviously adds up to
the satisfaction of (i).
(iii) The realization of the specified internal price level depends on the
aggregate of domestic demand and also on the absolute values of the
external price level and the money wage level.
This relationship takes as given the technical and competitive environ-
ment, the rates of indirect taxes and subsidies, etc. It does not imply any
particular pricing theory, such as “cost-plus”, so long as in a given demand
situation all prices and wages are in some determinate relationship. Since
demand is prescribed under (i), and the ratio of the external price level
to the money wage level is prescribed under (ii), the satisfaction of (iii)
requires unique absolute values for both the external price level and the
money wage level.
Another random document with
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harm the inhabitants. He found Torjok abandoned. Fearing lest
Constantine might join his brothers and attack in the rear, he was
greatly relieved when that prince sent his vanguard as aid, and also
the news that he was coming in person. Mystislav now moved
forward rapidly to the depths of Vladimir. He marched through the
enemy’s country, taking not only food and forage, but booty of all
kinds. As they advanced, his men burned everything before them,
and seized many captives. The Pskoff prince now met Constantine,
“their third friend,” as Mystislav called him. He arrived on Holy
Saturday. Constantine himself led the troops, and there was
immense joy at his coming. The allies passed Easter together, and
then pressed forward in Holy Week. The roads were so bad, and
Mystislav was hastening on so eagerly, that he was obliged to leave
his wagons behind.

On the Sunday after Easter, they beheld Pereyaslavl Beyond the

Forest, Yaroslav’s capital, but they learned that the prince [192]had
gone, taking all his men with him. Yuri, determined not to let any
enemy come near his capital, marched out to join Yaroslav, and met
him near Yurieff, on the famed banks of the Koloksha, where a battle
had been fought in the days of Yuri Dolgoruki. The place was better
known, however, through two other battles, one fought somewhat
more than a hundred years earlier, in Monomach’s day, when the
first Mystislav, great-grandfather of Mystislav the Gallant, leading
Novgorod regiments, crushed Oleg’s forces, and drove him to
Ryazan. On this same field, fifty years later, Big Nest inflicted a
dreadful defeat on the descendants of those same Ryazan men, and
settled the fate of their prince.

Yuri and Yaroslav fixed their camp on that field, renowned through
the deeds of their ancestors. They had not the least doubt of their
own triumph and the inevitable ruin of their enemies, all the more as
preponderance in numbers was immensely on their side. Yuri’s
brothers were all under the banner of their Grand Prince, except
Constantine. The forces of Murom had come, there were many
Novgorod citizens, and all the Torjok men. The main force, however,
was from the countless villages and towns of the Vladimir
principality, excepting that part held by Constantine. In the number of
its towns and in its military structure, Vladimir surpassed every other
division of Russia. Besides local forces, or militia, there were
irregulars, introduced by Yuri Dolgoruki. The nucleus of this force
had been formed from steppe tribes, though much of its character
had been changed by the gradual addition of local people. It had
grown to large dimensions, and resembled greatly the later time
Cossack force.

When Mystislav began the campaign and took Zubtsoff, he sent to

Yaroslav, saying that he did not like to make war on Vladimir, that
peace would be better. “I do not want peace,” replied Yuri; “to your
one man we have a hundred.” “Thou hast power, but we have the
cross,” answered Mystislav. A month had not passed after that, when
the opponents stood face to face, waiting for battle. The battle came
April 21, 1216, and from the place on the Lipetsk held by
Constantine it was called the “Lipetsk battle,” and the victory which
was won there was called by a name used only once in Russian
chronicles,—“The monstrous victory.”

The Smolensk regiments of Vladimir, son of Rurik, and those led

from Pskoff by Vladimir, as well as those brought by Constantine,
[193]were all given to Mystislav. He, with his Novgorod men and his
personal following, formed the soul of the action. He was chosen
with one voice to lead the warriors. In his name negotiations were
conducted. He sent to say to Yuri: “We bow to thee, brother. From
thee there is no offense, and has not been at any time; the offense is
from Yaroslav.” Yuri answered:
“Yaroslav and I are one. Ye have come to us; we shall see how ye
leave us.” Mystislav now gave command to say to Yaroslav: “Free
thou our Novgorod men, and withdraw from Torjok. Make peace with
us, and let no blood be shed.” “The men whom I took,” answered
Yaroslav, “I shall retain. The army has seized all their property;
where could I find it at this day?” Then the allies met in council, and
again sent proposals of peace to Yuri and Yaroslav, with the
statement that this message was final: “Brothers, we have come not
to spill blood, not for conflict, not for ruin, not to take your rightful
possessions. God forbid. We are all of one stock and race. We have
come to arrange matters in accord with God’s truth, and Russian
justice. Give your eldest brother seniority. Seat him in Vladimir, and
the Suzdal lands may belong to you.” Yuri sent answer: “Though our
father could not make terms with Constantine, ye think to make him
agree with us! Go to the places whence ye came. We do not wish
peace with you; we do not need it.” Both brothers commanded to say
specially to Constantine, that they considered all discussion ended,
and were ready for battle.

Yuri and Yaroslav had such power that they were confident of
success, and made a feast in their tents where joy was loud and
unbounded. They drank and were gladsome. They boasted that a
battle would show on whose side was justice. “They have come,”
said Yuri, “but how will they leave us?” The feast ended by sending a
message to Mystislav, stating that they were marching to Lipetsk and
would receive battle, if there were forces to meet them. That same
day, Mystislav assembled a council and accepted the challenge to
meet for a life and death struggle, and all kissed the cross to obey
him.

The allies feared Constantine’s weakness, remembering that he had

not come very promptly, that he had delayed at the outset, and might
even now join his brothers. But Constantine gave the oath asked of
him, and was first on the battle-field. In his regiments [194]trumpet
calls did not cease all that night, which was passed in alarm and
preparations for battle. In the morning, however, it was seen that the
princes who had challenged had evaded. Instead of being at the spot
agreed upon for action Yuri and Yaroslav had moved in the night to
another position. They had selected a place with a deep gully
stretching in front of it, while near by was “Widow Hill.” They had
strengthened this camp with palisades, and their wagons. Mystislav
and his allies occupied a height close to Yurieff. Constantine
disposed his men toward Lipetsk. To get at the enemy now,
Mystislav would have to cross the gully.

Yuri and Yaroslav, feeling safe at Widow Hill, did not think of fighting,
no matter how Mystislav challenged. To reach the hill through the
gully was impossible. So Mystislav sent three men to parley, and
again proposed peace as an end to the quarrel. “If ye will not make
peace, then come to the field, we will meet you; or if ye choose we
will go to Lipetsk and ye can attack us.” “We will not give peace, and
we will not abandon our position,” replied the two brothers. “Ye have
crossed our whole land; can ye not cross this small gully?”

Mystislav commanded his men then to advance at all hazards. But

no matter how he approached Widow Hill, he could not entice the
two brothers to leave it. He then decided to march on Vladimir
directly, and seize the town if possible. He commanded to raise the
camp quickly. At once Yurieff Mountain was seething, and soon the
army marched down, and moved off on the road to the capital. The
Pskoff prince now joined the main body. But Constantine delayed yet
at Lipetsk, where doubt and dissension seemed evident. He feared
“the desperate move,” as he called it. He said that his men were
simple villagers, unaccustomed to battle; he feared that they might
disperse on the march. It was better, he thought, to remain on Yurieff
Mountain. Mystislav answered with passion: “The mountain will give
neither victory nor defeat! In the cross and in truth lies our triumph.”
Aided by his brother and cousin he at last convinced Constantine
that it was necessary to march on Vladimir, and he commanded his
forces to advance.

As soon as the regiments were moving on the road toward Vladimir,

and before all had reached the road, a stir at Widow Hill was
observed, and directly the army of the two brothers left its position.
Both armies turned now toward the same side. [195]There was an
encounter at Lipetsk. Mystislav halted and the men of Smolensk and
of Novgorod faced the enemy. They stood without moving:
Constantine was at Lipetsk on one flank, Mystislav with Novgorod
warriors held the center; on the other flank was Vladimir, son of
Rurik, with Smolensk men. Between him and the center was
Mystislav’s brother with Pskoff troops. The whole force of the enemy
moved against them directly. Yuri and Yaroslav were confident and
smiling. Yuri’s warriors rushed straight at the Novgorod regiments, to
whom Mystislav had said already: “Brothers, we have come to the
heart of our enemy’s country, and that enemy is powerful. If we flee,
not a man of us will escape. Look not back in this battle. Forget
homes, wives and children. Fight to the death. He who is not killed
will be living. Hit hard! God is in truth, not in numbers. Forward like
men! Hit hard! Forward on foot or on horseback, but forward!”

The Novgorod men remembered the fight of their great-grandfathers

when they were led by the great-grandfather of Mystislav, and the
blood rose in them. “We will not fight on horseback,” said they.
Steam was rolling now from the oncoming enemy. The Novgorod
men threw off their boots and upper clothing and rushed to the fight
with axes and clubs, vying with the men of Smolensk in their valor.
Each man was bound to surpass every other, and no crowd of men
would stay behind any other crowd.
The first standard cut down was a standard of Yaroslav; the second
that fell was his standard also. The battle became very soon a great
slaughter. The Pskoff prince stood at the side of his brother, and both
watched the battle before them. All at once, Mystislav said to
Vladimir: “May God not permit us to abandon good men,” and he
rushed to the combat. Through the whole mass of his warriors did he
ride, encouraging them, saying that the moment for victory had
come. He made his way through all the ranks to the front, took from
his shoulders the cord securing his battle-ax and swinging the ax
plunged, at the head of the warriors, into the thick of the fight. Men
saw how he hewed to the right and to the left. His warriors followed
him with desperate venom. In a short time the field was a scene of
unpitying slaughter. Three times did Mystislav go back and forth
through the ranks of Vladimir, cutting down men right and left with his
terrible broadax. [196]The Smolensk prince and he of Pskoff broke
through the ranks before them till they reached the camp in the rear,
now abandoned by Yaroslav and Yuri.

Those princes, who had boasted of having a hundred warriors to one

of Mystislav’s, now found that for each one of Mystislav’s men killed
or wounded, ten or even more than that number had fallen on their
own side. The groans of the wounded and the dying reached Yurieff
from the battle-field, as the people said afterward; and of corpses on
that field they counted nine thousand, not reckoning those borne
away earlier.

Then the defeated fled, and all their camp fell to the victors.
Mystislav forbade his men to touch anything. “Leave the camp,” said
he, “and finish the battle, or they will turn back and defeat you.” The
Smolensk men could not refrain from plundering, but the Novgorod
warriors obeyed and rushed in pursuit of the enemy. Constantine
was the first man to stop fighting; when the tide turned to his side he
fought no longer. He pitied his brothers and did them no subsequent
injury. Their army was terribly defeated; whole regiments had been
destroyed.

Both Yuri and Yaroslav fled without looking behind them, the first to
Vladimir, the second toward Pereyaslavl Beyond the Forest. Yuri
raced into Vladimir on the fourth horse; he had ridden to death the
other three. He had thrown away on the road all his upper clothing,
and even his saddle cloth. Yaroslav fled still more fiercely. He rode
four horses till they fell, and reached home on the fifth. The wounded
and maimed flowed into Yurieff and into every village around it. Many
men were drowned in crossing rivers, others died on the road. Every
man cursed Yaroslav as the one cause of evil; on him alone did they
fix all the error.

When in Vladimir people saw from the walls a horseman rushing

toward the city, they thought him a courier with glad tidings from their
prince, but when he came nearer they recognized Prince Yuri
himself, in shirt and trousers. “Strengthen the town! Strengthen the
town!” shouted he, from a distance. Instead of joy, there was wailing.
During all that night broken remnants of the army were coming in;
some of the warriors almost dead, others wounded. If the victors had
chosen to follow, neither Yuri nor Yaroslav, nor any other man, could
have escaped them. They might have taken the city without
resistance. But they remained [197]all the following day on the battle-
field, and drew near Vladimir only in the morning on Sunday.

By agreement with Yuri, the citizens had closed the gates. When he
had drawn breath and recovered his mind, he said to the people:
“Let us keep the gates shut, brothers; perhaps we can stand a
siege.” “With whom can we stand it?” asked they. “Where are our
brothers? Some are killed, some are captives, others have rushed in
here naked and wounded. There is no one to work with us.” “That is
true,” answered Yuri, “but yield me not to Constantine, my brother, or
to Vladimir or Mystislav. I wish of my own will to meet them.” They
promised what he asked.

The allies, seeing the city closed, as if for a siege, surrounded it.
During the night between Sunday and Monday a fire broke out in the
palace, and there was great uproar. The Novgorod men wished to
attack, and were climbing the walls, when Mystislav stopped them.
The fire was extinguished quickly, but a new fire burst out on
Tuesday, two hours after sunset, and burned until daybreak. The
Smolensk men rushed to mount the walls then, but were again
forbidden. Yuri now sent a petition, saying, “Do not press me; I will
come out to meet you to-morrow.”

On Wednesday he went to the enemy, taking with him his two

younger brothers, Vladimir and Sviatoslav. He bowed down to the
victors, and said: “Brothers, I bow down to you, do not deprive me of
life, and let that be with Constantine which pleases you.”

Constantine was made Grand Prince, and all was arranged to

receive him with triumph. To Yuri was assigned a small town near the
Volga, whither he was to set out immediately. His wife and
attendants went at once to the boats which had been prepared for
the journey. People were greatly moved by the conduct of Simon, the
bishop, who would not part with Yuri. He had shared the sorrows and
joys of the prince all his life, and now he sailed down the Klyazma
with him and his family. Before leaving for exile, Yuri took farewell of
his parents. He bowed down and prayed at the grave of Big Nest, his
father, and said, while weeping: “God is the judge of my brother.
Behold to what Yaroslav has brought me.” Afterwards he left in
humility, no one appearing to note his departure. He went to the
small town assigned him, to his “little town;” thus did he call the place
of his exile without naming it. [198]
As for Yaroslav, he was not tamed by defeat and suffering. The
second week after Easter the allies went to Pereyaslavl. Constantine
appeared first. Yaroslav went forth, with great gifts, to meet him, and
opened the gates, begging his brothers not to surrender him to
Mystislav. Constantine, wishing to reconcile the two men, sent gifts
to Mystislav from his brother, whose part he took most earnestly.
Mystislav would not yield, but demanded his daughter, Yaroslav’s
wife, and took her with him. Afterward Yaroslav tried to recover the
princess, but Mystislav paid no heed to his demands. Thus the
quarrel between the sons of Big Nest ended in Constantine’s
triumph. He was installed in Vladimir immediately, while Yuri and
Yaroslav were effaced for the moment.

A misfortune met Mystislav now: Vassili, his only son, died in Torjok,
and was buried in Holy Sophia, near the tomb of his grandfather.
Soon after this, Mystislav the Gallant left Novgorod. He promised to
return, but this time, as appeared in the sequel, he parted with the
city forever. As was usual before meetings, he had the Sophia bell
sounded, and the people assembled thinking that they had been
summoned for Novgorod business. But Mystislav bowed on three
sides to all present, and took farewell of them solemnly. They could
not credit his words: they had thought that he would remain in their
city till his death. He declared then the cause of his going: “I wish to
save Galitch.” They implored him to stay with them, and all cried out
that they would not let him leave Novgorod. “I shall never forget you,”
said Mystislav. “God grant me to lie down here at last near my father
in Holy Sophia, but to-day I must go from you.” And he left them.

Indeed it was time to remember the promise given Daniel, and

avenge the shame wrought on them both by the Poles and
Hungarians. If, when Roman was forced to leave Galitch, the Latin
Church made Galicia a bishopric, it is easy to imagine what
happened under Koloman and Salomeye. When this youthful king
and queen had been crowned in obedience to Rome, the Latin
Church triumphed directly. Latin priests were installed, while the
Bishop of Galitch and Orthodox priests were expelled from their
churches on all sides. Mystislav now assembled Russian princes
and roused them to this Galitch question. Mystislav, [199]the Kief
prince, having lost the favor of Mystislav the Gallant, was unable to
help him, but his other cousin, Vladimir of Smolensk, promised aid
very willingly.

Mystislav then went to Khan Kotyan, his father-in-law, and obtained

warriors from him. Daniel, son of Roman, was delighted to help in
freeing Galitch.

But if Russian princes were preparing to fight for their Galitch

inheritance, the men who had seized that inheritance were preparing
to keep it. To Koloman came reinforcements from his father. Leshko,
dividing his army into two parts, sent one to defend his young
daughter in Galitch; the other he led to threaten Volynia. Depending
on those princes in Galitch who did whatever he asked of them,
Leshko and Bailski, his ally, threatened with these henchmen other
princes, known allies of Mystislav. Bailski looked on Daniel as
Mystislav’s main ally.

Daniel and his brother would have moved at once to help Mystislav,
since they were threatened earliest, but their possessions, both on
the Polish and Russian side, were attacked by swift enemies. They
were met at every point by evil neighbors, “all men were against
them,” as the chronicler informs us. “Save from God they had no aid
from any one.”

Mystislav waited for the Polovtsi; when they came he began action.
His faithful friend and ally, Prince Vladimir, brought with him the
promised warriors of Smolensk, and he and Mystislav then moved
against Galitch. But Daniel did not go with them. They received no
word from him, for he was greatly occupied elsewhere. Daniel would
have been troubled to count the toils and battles which he passed
through at that time. With whom and where had he not struggled? In
recent days his conflicts with Poles had increased. They roused the
Yatvyags against him and against those Lithuanians who were under
him. Daniel, defending these men, warred frequently in forests and
wild regions belonging to their enemy. He met the Poles themselves
among his Lithuanian subjects, whom the Polish princes tried to take
from him through interference and intrigues. The Poles also attacked
Daniel on the Būg, where he was forced to meet them, and through
Bailz and Lutsk he met continual raids from Russian princes.

Only after Mystislav had come and triumphed, could Daniel

[200]breathe with some little freedom, but till Mystislav appeared the
first blows of Poles, and also of Hungarians, fell directly on him.
Beginning with Benedict Bor, the famous harrier of people,
Hungarian magnates were frequent visitors in Galitch. Ruling in the
king’s name, they differed little from that renowned Bor known as
“Antichrist.”

In the time now before us, the chief man near Koloman was Filni, a
magnate whom the Russians nicknamed “Filya.” Hungarian
magnates in those days were famous for haughtiness, but Filya
surpassed all Hungarians in this regard. Moreover, to this nickname
was added another; he was called “Filya the Important.” Of him
people said, and this was stamped on his countenance, that he
thought his equal was not on the earth, that he could embrace the
whole world, and drink the whole sea up. It was known also that
though his pride was unbounded, his mind was quite limited. When
on a time Filya was warned before battle that his enemies were
many and his strength insufficient, though as a rule he avoided
battle, he repeated, when moving his warriors: “A stone is but one;
still it breaks many pots just by moving.”
Koloman and Salomeya reigned in Galitch, but all things were
managed through Filya, whose aids were traitorous boyars, of whom
the chief man was Sudislav. These boyars wished to merge Galitch
in Hungary, and were hated by common folk. “Sudislav the traitor,
the disturber of the country,” were the only words used to describe
this man.

When news came that Mystislav the Gallant was marching, Filya and
Sudislav made preparations to defend the city. Filya placed himself
at the head of Hungarian and Polish forces, and put Sudislav in
command of the Galitch men. He did not dream, in his confidence,
that the enemy could come near the capital, still he took measures to
meet a siege seriously. To show that in the building of fortresses he
was not inferior to the celebrities of that day, he strove in every way
to make Galitch impregnable. In doing this he roused the indignation
of the Orthodox. He seized the cathedral, made it a fortress, and
added a tower to it.

The excitement of the adherents of Hungary and Poland was

extraordinary. Sudislav and his friends, in their rage at the man who
was moving Russian regiments against them, declared that
[201]Mystislav wanted to deliver all boyars to the Polovtsi, and settle
the steppes with them. Their hatred for Mystislav was boundless,
and, through the efforts of Poles, Hungarians, and their partisans
among Russians, a venomous opposition was raised against him.
He had marched half-way from the Dnieper to the upper waters of
the Dniester and the San, when blood commenced to flow in Būg
regions. At the opening of the war, Leshko promised Filya to protect
the rear of the Polish and Hungarian troops, which, combined,
seemed able to hurl aside Mystislav; and after that Filya was to finish
him. Leshko had undertaken besides to hold down Volynia, and not
let it move to assist Mystislav.
Leshko entered Volynia territory and seized towns and cities. Daniel
and Vassilko had work in plenty near their own capital. Konrad, more
honest than Leshko, his brother, tried in vain to make him friendly to
Daniel, and hostilities in Volynia continued. If they were not of
greater violence, and even fatal to Daniel, it was because Mystislav’s
campaign was ended with one blow, and so quickly that neither Filya
nor Leshko could foresee such a result. The Hungarian magnate had
been deceived in the strength of his enemy, and only came to his
mind when Mystislav was near Galitch. Then he and Sudislav
hastened to lead forward their forces, and block the road to the
gallant prince.

The place of meeting was a broad, rolling country, from the highest
points of which all other high places were visible. On lower slopes,
and in depressions between one round-topped high place and
another, a commander might hide a whole army. Filya drew up his
warriors and disposed them in two camps apart from each other. It
seemed to him that no man could stand against this force. The Poles
and Sudislav’s regiments from Galitch were placed by themselves in
one body. One of these forces was to meet the oncoming enemy on
his right, the other on his left flank.

Mystislav, leaving in one of those deep depressions just mentioned

his Polovtsi legions, moved forward against Filya. From a distance
he saw that the Poles were too far to one side for their profit, hence
he commanded Vladimir, his ally, to entice them away with his
warriors, who were eager for battle, and while struggling with them to
retreat toward the Polovtsi.

The Poles met Vladimir’s men bravely, forced them back toward the
ambush, and followed. Mystislav marched with chosen regiments
[202]and his personal following to the high place beyond which was
Filya’s position. Relying on the valor of his ally, whom he had tried
against Yuri and Yaroslav, and on the great number of the Polovtsi
who were placed in ambush, he seemed to abandon Vladimir and
his men. The Poles followed the retreating Smolensk men toward the
place where the Polovtsi were waiting, as Mystislav could see
clearly. Right in front of Mystislav stood Filya. It was imprudent now
to delay longer. Strengthening his army with the name of the holy
cross, he rushed at the enemy. The battle was grievous, but
Mystislav triumphed. The Hungarians were crushed, and Filya was
captured.

When the Poles had driven Vladimir as far as they wished, and had
seized many prisoners and much booty, they returned shouting
victory. Not suspecting that Filya had been terribly beaten, they
marched back rejoicing, but, instead of finding Filya in possession of
the battle-field, they came upon Mystislav’s warriors, who rushed at
them savagely. Meanwhile Vladimir had turned, and with him came
the Polovtsi. A great slaughter set in. The Polovtsi took captive all
the Poles who were not slain, taking from them their arms and
horses. But Mystislav’s men touched no booty. Following the enemy,
as they scattered in every direction, they slew without mercy. The
whole field was covered with bodies, and the streams which ran
through it were crimsoned with blood.

Mystislav stood before Galitch immediately, and demanded

surrender, promising immunity to all. Filya, in spite of his
impregnable fortress, sent a courier advising surrender. Since he
himself had been beaten, he despaired of success through another.
Mystislav repeated his summons three times, but with Koloman were
leaders who would not surrender; they relied on the stronghold, and
swore to endure to the end with their sovereign. Sending out all who
could not fight, so that there should be no useless mouths in the city,
they made ready for the siege.
Mystislav declared that from that hour there would be no mercy
shown to any man, and he prepared to take Galitch by storm. The
Hungarians were confident, and strengthened the gates of the city.
That Mystislav was digging a tunnel under their stronghold they
knew not, and that it was finished they only discovered one gloomy
night when his warriors rose through the earth and cut down the
guards at the gate, which they opened then to their comrades. [203]

At daybreak, Mystislav with his army was in Galitch. The leading

Hungarians shut themselves up in the church, which Mystislav
surrounded. They were unyielding; they threw stones and shot
arrows, but at last they were captured. The magnates and their
families, for whom immense ransoms were expected, and some of
the higher Poles, were divided among the victors. Koloman, his
queen, and Filya went to Mystislav. Sudislav, the artful, fell at
Mystislav’s feet, embraced his knees, wept, and swore that while
living he would serve him most faithfully. Mystislav, knowing little of
Galitch, and seeing the position which Sudislav held among boyars,
not only left life to that traitor, but gave a good town to him.

The people magnified Mystislav now as the deliverer of Galitch; they

called him the shining sun, the bright falcon. Their delight at being
freed from foreign men seemed unbounded and heartfelt. When
news came to Leshko of Filya’s defeat, he immediately made peace
with Daniel, and feigned immense love for him. Daniel wished now to
see Mystislav, his father-in-law, so he hurried off quickly to Galitch.
The delight of those two men was great. Not only were they avenged
on Poles and Hungarians, but those enemies had been paid back a
hundredfold, and were eliminated as rulers from Galitch. The
Orthodox people said that God had given those two nations into their
hands to punish the enemy for defiling His temple, which had been
turned by them into a bastion of battle. The people did not forgive
this “great sacrilege,” as they called it.
Thus Hungarians and Poles perished in a land which they had
planned to take from its owners. Many were killed in battle, others
were taken prisoners, still others perished on the roads and in lonely
villages. They died of hunger in forests, or were drowned in crossing
rivers. People rose up and slew the invaders wherever they found
them. Few escaped.

On losing his son, Vassili, Mystislav had no heir left. His youngest
daughter was in tender years yet, his eldest daughter had married
the son of Big Nest, Yaroslav, whom he held in his power; his second
daughter, Anna, was the wife of Daniel, who, as heir to the great
Roman, would have seemed the direct heir of Galitch. The people
thought that land would surely go now to Daniel, but deceit and
intrigue disappointed them. Not only in [204]Galitch but in Volynia
there were falsehoods, conspiracies, and endless struggles.
Mystislav’s victory changed the form, not the substance of the
misery. Men now persuaded the prince to take Galitch himself, and
Daniel was set aside promptly. At the prayers of Koloman’s father,
peace was concluded, and reports were sent out that Mystislav was
to give his youngest daughter in marriage to King Andrei’s second
son.

Meanwhile in Volynia Bailski made war against Daniel. Daniel

defeated his enemy, and was ready to give the last blow to him,
when Mystislav commanded his son-in-law to withdraw and not
trouble Bailski in future. Andrei and Leshko from having been
enemies of Mystislav became his friends in appearance, but their
friendship was more deadly to Russia than their enmity had ever
been. Supported by Leshko and Mystislav, Bailski acquired so much
influence that Roman’s sons lost all the power they had won. Bailski
made use of the open and unbounded confidence of Mystislav, who
was a great man in battle, but short-sighted and incompetent as a
ruler, and strove to persuade him to a direct war against Daniel. In
this he was aided considerably by Leshko, and though they failed at
first, they succeeded later on. So neither Volynia nor Galitch gained
anything from Mystislav’s victory.

Forgetting for the moment all care touching Galitch, Daniel

established himself firmly in his own place, which, notwithstanding
the woes of that period, he served very sensibly. He took from
Leshko the border lands that the Poles had attached to Mazovia.
Though the profit of this winning did not seem much at the time, it
proved very great in the sequel.

Brest was at first a border settlement of Russia, beyond which were

the Yatvyags and the Lithuanians. In ruling those regions, the
Russians did not quarrel with their Lithuanian neighbors. The
Lithuanians had long been protected by Russian princes, to whom
they paid a small tribute. The Poles, after seizing the country, acted
differently and harshly with these people. When Daniel restored the
places to Russia, the whole country breathed much more freely. All
the elders, or, as the Russians called them, princes, sent solemn
declarations of peace to Daniel, and thereafter he found in them
faithful allies against Leshko. Those tribes had many relatives, both
in the Baltic country and in Poland, who would help them when
proper agreements were made. They [205]now aided Daniel against
his Polish opponents, and with their assistance he carried on further
struggles with Leshko. At this time there was a special movement
among Lithuanian tribes, which till then had been quiescent.

When Mystislav the Gallant went to the South and did not return, the
North ceased to think of him. There were no lasting results from his
victories and exploits, either in Novgorod or Vladimir. Constantine,
son of Big Nest, who had never been stalwart of body, died in 1217,
shortly after he had taken the throne of Vladimir. He had made a
friend of Yuri, his brother, and, when dying, committed his children to
Yuri, who after Constantine’s death was again ruling prince in
Vladimir. Yaroslav, while Prince of Pereyaslavl, continued to occupy
Novgorod at intervals. He held Turjok as though it had been a part of
Vladimir, and no matter what prince was acting in Novgorod,
Yaroslav’s hand never ceased to be felt there. The Novgorod men
could not live without Yaroslav, or be content with him. At this time, to
round out their troubles, their way to the sea was cut off by German
knights, the Chuds (Fins), and Lithuanians, against whom they
warred frequently. Yaroslav, in fighting with these enemies of
Novgorod, went far into the country. He marched to places where no
Russian prince had ever preceded him. [206]
[Contents]
CHAPTER IX